Collections question?

Question

I was sent to collections for becoming delinquent with my credit card payments.

I was irresponsible...I understand that.

I've called the collection agency and arrangment payments for three months.

Why do I keep reading that if you pay these "derogatory items" then your credit score will go DOWN but, if you do not pay your credit will stay as is and only improve with time?

I don't understand-is this true? What would be the incentive for anyone to pay off their debt (besides moral) I think it's ridiculos, that I've realized that I've made a mistake and have done everything to make it right yet-I'm worse off by doing so.

Please explain.

Answer 1

The biggest problem with paying a delinquent debt without requesting deletion, as far as credit reports go, is that usually by the time someone gets around to paying a collector, the negative account had aged making it somewhat less of a negative as far as FICO and other scoring models are concerned.

When the delinquent debt is finally paid or a payment is made, the collector will update the tradeline which will result in the negative "looking" newer than it actually is. Because of that, the scores will drop since the old negative will be factored as a newer negative.

There is absolutely nothing wrong with paying debts, **even past SOL debts, as long as the collector can prove without a doubt that the debt is actually yours, that they own/were assigned the debt, that the amount they are requesting is the legal amount, that they have followed the law in collecting and reporting, etc., etc., etc.
And that they will provide a signed agreement, if they agree to a lesser amount, that they will consider the lesser amount as payment in full and will not continue collections on the remaining (or full) amount - which includes selling the remaining portion or even the full amount (which they often do) And that they will provide a signed agreement to remove anything they have placed on the credit reports.

**If a person happens to be past the collecting SOL for their state, they do have a legal right to inform the collector of that fact and a legal right to not pay.

The problem in dealing with collectors is - you cannot trust them !!!

You may pay a collector only to find that they no longer even own/have the account, which leaves you to fight with them and the collector that actually does own it.
You may pay a collector, even pay in full, only to find a year or two later a new collector popping up on your reports for the very same debt that you already paid because the collector you paid sold them the debt after being paid for it. Good luck on "easily" getting rid of that.

I realize I've wandered a bit off the topic of why a paying a negative can hurt, but it's only to tell you what you may face in paying a negative. You can still request validation of the account and you can still request that they agree that your payment will be considered payment in full and that they will cease all collections, including selling the debt or remaining portion if there is any, after the agreed payment. And that they will remove what they have placed on your reports upon payment.

Since you made a "verbal" agreement with them - do not expect them to live up to their agreement.
Every contact you have with them should be done in writing and sent certified mail, return receipt. You should demand that every contact from them be in writing and not by phone.

In short - when dealing with a collector, protect yourself !!

Answer 2

I work for the collections department of a credit card company. As far as I know payment only helps your credit. Your credit report contains, from your creditors what is called an contracual age which looks like:
00003210X . An X is when you have no balance and 0 indicates your payment was on time. a 1,2,3 ect indicates how far deliquent your account is. Your creditors usually display 2 years of contracual age. So say you have a rocky start in paying your account and it looks like the one above. But you continue to make ontime payments for the next year and a half...those "slow pays" will eventually drop off and be replaced on your report with an ontime payment. So what was...
003210X will become 000000000000 000000000032 and so forth.
Now a charge off (when is when a credit company sells your account to an outside collection agency after 6 months of delequency) stays on your account for 7 years! But if you pay off that account it will show up as "Collections Account Paied In Full" which is till bad but will look alot better than non payment. A good creditor will look both at your credit score and what's in the actual report. Belive me it's always better to make your payment before you go to a collection agency if you can. Your creditors most of the time will be eaiser to deal with if you have problems with payments than an agency. Alot of people make the mistake of just letting things slide if they can't make a payment. You should always call your creditor if you have trouble...you may be suprised at what they will be willing to work out!

Answer 3

You are totally correct. This is why I finally did a ch.7 bankruptcy. I was sick and tired of loosing this battle with these companies, while I see them get richer and I get more poor. I have paid all my credit cards off 100 times over already. ENOUGH IS ENOUGH!! I'm not letting them ruin MY life!! You just can't win paying those leeches!!

Answer 4

Another thing to remember is that creditors look at more than just your score. They look at your whole credit report. A paid negative looks a whole lot better than an unpaid one.